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Can we split reportable slot machine winnings?

6 August 2007

Dear John:

I often go to the casinos in the Chicago area, and play slots with a friend. We combine our money for the day. I know that any win of $1,200 or more on one pull requires a hand-pay and IRS paperwork.

My question is, can casinos split a pay of $1,200 or more? Can we each get $600, since the coin-in was pooled? If not, then I guess one of us has to take the tax hit, and we have to work out the post-tax pot between us.

Further, let's say we win a jackpot that is $2,400 or greater. Would they allow us to split that, since we would each get an IRS form? Or again, would one of us have to claim the whole thing, then work it out among ourselves?

Of course, if we hit a big one, and the casino cannot split it, would there then there would be further gift tax issues when one of us writes a (hopefully) big check to the other!

I know that when a big group (like an office pool) wins the Powerball or Mega Millions lottery game, even though its one ticket, the lottery splits the prize among all of those who pooled their money. Does this go for casino hand-pays as well?

Thank you,
Michael

Dear Michael,

The instructions for IRS form 5754, the form you fill out to tell the payer how the winnings will be split, refer to splitting a winning ticket. Yet the top of the form has a space in which to write the machine number. And Nelson Rose, in an article on this site on January 9, 2002, wrote, "Big winners are reported to the IRS on a special Form W-2G. If winnings are to be split, as with a lottery pool, winners are reported on a Form 5754." Rose uses splitting lottery winnings as an example, but doesn't say it's the only time Form 5754 applies, so I think you should be able to split slot machine winnings, though I don't know of anyone who's has done it.

As for the W-2G, you would each get a W-2G for your share of the winnings. If the jackpot was $1,200 and for shared the jackpot evenly, for example, you would each get a W-2G for $600.

And now for the obligatory disclaimer: I am not a tax accountant. You should consult a tax advisor, especially one familiar with gaming taxes, to be sure you can do what you want to do and to be sure you do it properly.

Best of luck in and out of the casinos,
John


Send your slot and video poker questions to John Robison, Slot Expert, at slotexpert@comcast.net. Because of the volume of mail I receive, I regret that I can't reply to every question.

John Robison

John Robison is an expert on slot machines and how to play them. John is a slot and video poker columnist and has written for many of gaming’s leading publications. He holds a master's degree in computer science from the prestigious Stevens Institute of Technology.

You may hear John give his slot and video poker tips live on The Good Times Show, hosted by Rudi Schiffer and Mike Schiffer, which is broadcast from Memphis on KXIQ 1180AM Friday afternoon from from 2PM to 5PM Central Time. John is on the show from 4:30 to 5. You can listen to archives of the show on the web anytime.

Books by John Robison:

The Slot Expert's Guide to Playing Slots
John Robison
John Robison is an expert on slot machines and how to play them. John is a slot and video poker columnist and has written for many of gaming’s leading publications. He holds a master's degree in computer science from the prestigious Stevens Institute of Technology.

You may hear John give his slot and video poker tips live on The Good Times Show, hosted by Rudi Schiffer and Mike Schiffer, which is broadcast from Memphis on KXIQ 1180AM Friday afternoon from from 2PM to 5PM Central Time. John is on the show from 4:30 to 5. You can listen to archives of the show on the web anytime.

Books by John Robison:

The Slot Expert's Guide to Playing Slots